Construction in 2026: Market outlook from Coates
Summary
Coates forecasts a moderate recovery in the Australian construction market by 2026, driven by engineering, utilities, and defence sectors, while residential construction remains flat.
Why It Matters
Understanding the projected trends in the construction industry is crucial for stakeholders, including contractors and investors, to navigate upcoming shifts in demand and investment. This outlook provides insights into the sectors poised for growth and the challenges ahead, enabling better strategic planning.
Key Takeaways
- Engineering construction is expected to rise 6.5% to nearly $150 billion by FY27.
- Utilities and defence sectors will drive construction activity, particularly in water and electricity projects.
- Residential construction is projected to remain flat until FY27, influenced by policy changes and rental yields.
- Data centers are emerging as a significant growth area, with investments nearing $100 billion.
- Public sector spending will support growth in social and institutional construction despite a slowdown in non-residential sectors.
Coates’ analysis indicates engineering construction will rise 6.5 per cent to close to $150 billion from FY26 to FY27. (Image: escapejaja/stock.adobe.com) Coates has outlined several trends it believes will shape Australia’s construction landscape in 2026, pointing to a period of moderate but sustained recovery despite ongoing short-term pressures. According to James Lawrence, group manager, Customer and Markets at Coates, the current recovery phase will lay the foundation for strong growth throughout the second half of the decade. “From late FY26 to FY27, Australia’s total construction activity will average over $300 billion per annum, with engineering construction accounting for almost half of construction spend,” says Lawrence. The outlook highlights structural shifts across sector demand, project types and regional activity that contractors and project teams are expected to contend with over the coming year. Transitioning to a utilities and defence-driven cycle As the transport infrastructure pipeline reaches its peak and begins to ease during FY26, Coates expects utilities and defence to take on a more prominent role in driving construction activity. “After more than a decade, Australia’s transport-led boom will give way to a surge of construction activity in utilities and defence, predominantly led by water projects, utilities, transmission, power generation and base expansion programs,” says Lawrence. “During this cycle, private capital will accelerate growth in ele...
